ACC210 101-Imagine you are the accountant for Drive Write

Subject: Business    / Accounting
Question

Imagine you are the accountant for Drive Write, a company that produces computer disk drives, and you are in charge of all accounting functions within the company. The president has informed you that if the company’s profits grow by 20 percent this year, you will receive a $20,000 bonus, and she will receive a $50,000 bonus. No bonuses will be awarded if profit growth is less than 20 percent. Because the company’s profits have grown 20 percent annually for the last 10 years, investors have come to expect significant growth from one year to the next. Near the end of this fiscal year, the president and you have the following conversation:

President:

We are awfully close to hitting our numbers and getting to the 20 percent target. With two weeks remaining, projections show we will come in at 18 percent for the year. What can we do on the accounting side to increase current year profits?

Accountant:

Well, I’m not sure there is anything we can do. Our accounting is squeaky clean, as confirmed by our independent auditors. Perhaps our sales will improve next year.

President:

There has to be something we can do—I could sure use the bonus money, and our investors would appreciate an increase in their investment! I know we have a large customer order to be filled the first week of next year. Why not include that sale in this year’s numbers?

Accountant:

I’m not comfortable recording sales in the wrong fiscal year.

President:

We’re only talking about moving sales by a few days! I would like you to consider this carefully. If you can’t do this, I may have to find an accountant who can! Let’s talk about our options later this week.

Question: The situation at Drive Write creates a serious ethical dilemma. (The Drive Write example is based on a real company called MiniScribe Corporation, subsequently purchased by a competitor.) Companies are constantly under pressure to meet sales and profit goals. Employees who succeed in meeting these goals often reap huge monetary rewards; those who fail may be penalized with lower pay or may even lose their jobs.

See the IMA Statement of Ethical Professional Practice found athttp://www.imanet.org/resources-publications/ethics-center. (Opens in a new window. Plain text:http://www.imanet.org/resources-publications/ethics-center)

Describe the four key standards of ethical conduct for IMA members outlined in the IMA Statement of Ethical Professional Practice.
What steps does the IMA recommend for resolving ethical conflicts?
Using the IMA Statement of Ethical Professional Practice as a guide, discuss your options as the accountant at Drive Write.

Grading Rubric:

Requirements for the assignment were met.
Correct grammar and spelling were used.
The project was submitted by the due date on the schedule.

Source: Managerial Accounting, v. 1.0 by Kurt Heisinger and Joe Hoyle, published by Flat World Knowledge